February 2008: Groundbreaking News

Rental Industry Cautiously Optimistic In 2008

Terex’s Big Purchase of Small Loaders

GM Sells Medium-Duty Chassis Cabs to International Trucks

Caterpillar Tracking Systems on 2008 Machines

MMD Distributes Komatsu Utility Products

Letter to the Editor

Rental Industry Cautiously Optimistic In 2008

Economy ­­— it’s the word on the tip of everyone’s tongue. With the slump in residential construction continuing and the cost of a barrel of oil hovering around $90, contractors are keeping a closer eye on competitive bids while manufacturers are busily tracking machine sales. But the rental industry is optimistic in 2008. According to a poll conducted last November by the Rental Equipment Register (RER), 65 percent of rental companies responded with expected growth in rental volume compared to 2007.

34.2 percent predicted a 1- to 5-percent increase, 28.6 predicted percentages to be up to 6 to 10 percent and 3 percent expects more than 10 percent. With all the turmoil in the economy, what can account for this outlook?

“We remained strongly focused on our customers and our strategic objectives in 2007, despite a lengthy merger process. Our expected 2007 increase in EBITDA reflects the value of refocusing on our core business, managing our rental fleet for better returns and implementing a number of cost-saving measures,” Michael Kneeland, CEO of United Rentals told the American Rental Association (ARA). “Our 2008 outlook anticipates the continued success of this strategy recognizing the limited growth expected in our primary end markets.”
Though Kneeland also predicted that rental rates would decline in 2008 by about 1 percent, he believes the industry has become “more disciplined” and that rates will not become overly weak despite a flat construction market. Interestingly enough, 50 percent of the companies polled said that they would raise rental rates for 2008.

But the positive outlook doesn’t mean rental companies shouldn’t be cautious. By the end of 2007, United Rentals eliminated 1,100 personnel, closed several under-performing branches and opened fewer new branches — the company opened 15 new branches last year, compared to an annual average of about 30 in previous years, dropping the total number of branches from about 730 to fewer than 700.

Nevertheless, 55 percent of polled companies said that they expected to increase their capital fleets this year — the highest purchases being in aerial work platforms, compact earthmoving equipment, compaction equipment, forklifts and concrete equipment.

Terex’s Big Purchase of Small Loaders

As a global conglomerate that gobbles up corporate acquisitions, Terex is known for buying overseas companies such as Fermec, the European manufacturer of backhoe loaders, and Schaeff and Fuchs, a German compact equipment manufacturing powerhouse. But Terex recently set its sights on ASV ­— the North American manufacturer of compact rubber track loaders and related accessories, undercarriages and traction products ­— for its latest purchase.

Valued at approximately $488 million, or $18 per fully diluted share of ASV common stock, Terex expects the transaction and merger to close by the end of the first quarter of 2008.
“ASV is a leader in compact track loader technology and with the global reach of Terex, we see tremendous opportunity for expanding ASV product sales,” said Ronald M. DeFeo, Terex chairman and CEO. “The ASV acquisition is an excellent strategic and cultural fit and provides a great addition to our product offerings as Terex continues to grow as a global construction equipment manufacturer.  

“From a financial perspective, we expect that ASV will add approximately $220 million to $250 million in sales on a 2008 full-year basis and we are confident that this acquisition will enhance future earnings growth potential for Terex.”

Through the acquisition, ASV gains access to a larger company with a global footprint. It also provides the company with a broader product line and a boost in production facilities from Terex machines.

ASV compact track loaders feature a patent-protected undercarriage and exert one tenth the ground pressure of a skid steer loader, resulting in much less ground or turf damage during work. In addition, compact track loaders offer increased traction and greater stability.  ASV compact track loaders will join an existing Terex compact equipment range of backhoe loaders, mini excavators, compact wheel loaders, site dumpers, compaction rollers and generators.

GM Sells Medium-Duty Chassis Cabs to International Trucks

The excitement of a story rests on the twists and turns — when new facts come to light and blindside the audience. In an interesting twist of its own, General Motors (GM) has entered into a tentative agreement to sell its line of medium-duty trucks to Navistar International Corp., its major subsidiary being International Trucks.

As proposed, Navistar would acquire GM’s medium-duty truck business, which includes assets and intellectual property rights to manufacture GMC and Chevrolet brand vehicles in the Class 4 to 8 gross vehicle weight (GVW) range. It also includes purchase of the related service parts business. Navistar would sell a competitive line of Chevrolet and GMC vehicles and service parts through GM’s proprietary dealer network in the United States and Canada.

“Navistar’s expertise in building International brand commercial trucks and its track record in the medium-duty segment makes them an excellent choice to acquire and continue growing the business. We intend to work closely with Navistar to make this transition seamless to our dealers and customers,” said Troy Clarke, president of GM North America.

When a deal is definitively concluded, production of the vehicles would move from GM’s plant in Flint, Mich., to a Navistar facility to be named.

GM would retain ownership of its Flint plant and continue to build other products at the facility. GM will continue its medium-duty truck relationship with Isuzu to market W-Series trucks through GM’s medium-duty dealer network.

The deal is expected to close in 2008, subject to completion of satisfactory due diligence, the negotiation of a definitive purchase agreement, customary regulatory clearance and board approval. Upon closing, transition of the business could take several months to conclude.

“We are proud to incorporate the GM truck brands into our portfolio and will utilize the scale to build on the success of both the International and GM product lines and their respective distribution networks,” said Daniel C. Ustian, chairman, president and CEO of Navistar International Corp.

Caterpillar Tracking Systems on 2008 Machines

In a day and age when heavy equipment theft costs total nearly $1 billion and equipment recovery rates hover around 10 and 15 percent, according to the National Equipment Registry (NER), the crook-conscious contractor needs all the protection he can get. So, Caterpillar has announced that its 2008 core, mining and industrial machines will come standard with EquipmentManager and Product Link — the remote asset management solution developed by the equipment manufacturing giant.

Beginning with Cat’s wheeled hydraulic excavators and articulated trucks, the remaining machines will be phased in throughout 2008, arriving to dealers and customers with Product Link as standard equipment, along with a three-year subscription to Asset Watch, the remote asset management portion of EquipmentManager.
The EquipmentManager, which tracks a machine’s key indicators such as hours, location and diagnostics through a secure, Web-based application, has been an option on machines since 1998. By applying the system as standard equipment, equipment managers can now use it to keep an eye on the full depth of asset management, maintenance and health information needed to manage their fleets.

Combined with powerful tools such as mapping, maintenance scheduling and troubleshooting instructions, EquipmentManager quickly sorts through machine data to identify events that require attention and delivers information in a meaningful and actionable manner.

Using satellite technology, Product Link is the hardware that enables information flow between on-board systems and the Web-based application, EquipmentManager. The remote management system provides machine location and hours as well as time and geo-fencing capabilities.

MMD Distributes Komatsu Utility Products

Wisconsinites now have something more than a slice of the state’s delectable American or sharp cheddar cheese to get excited about — Mitsui Machinery Distribution Inc. (MMD Equipment) is now a Komatsu Utility Products distributor in Pewaukee, McFarland and Eau Claire, Wis.

This new deal gives MMD Equipment the power to provide Komtasu compact excavators, skid steers, compact track loaders, backhoe loaders, dozers, crawler carriers and wheel loaders to rental and retail customers in Wisconsin.

“MMD is pleased to expand our relationship with Komatsu into the Wisconsin market for utility products. We look to bring these products along with aftermarket support in locations that are convenient to the customer needs,” said Bob Wright, president of MMD Equipment. “With three locations already established, we are well on our way to our goal of statewide coverage for Komatsu Utility equipment.”

Once just a distributor of fork lifts, MMD Equipment is now a global importer and distributor of a range of construction equipment, including Airman portable air compressors and TCM wheel loaders. MMD is also the exclusive supplier of Yanmar excavators to the North American rental industry.

Komatsu came into the North American market at the same time as MMD — the 1970s — and today, markets a full line of integrated construction equipment, including excavators, wheel loaders, off-highway trucks, motor graders and crushers.

For more Komatsu distributors, use the new online distributor search at www.komatsuamerica.com.

LETTERS TO THE EDITOR

This is a response to a letter from Glenn Fox from PULS Inc. [in the January 2008 issue]. It was both enlightening and informative to hear his assessment of the locating industry.

As an owner of a water and sewer company in Pennsylvania and a party to the recent rewrite of the PA One Call law, I have a vested interest in the marking and exposing of underground utilities. As a company, we cross thousands of underground utilities yearly; to say we don’t break any would be a lie. We do break lines and when we do, I immediately hold our crews accountable before I look to blame another party. My crews need to be able to demonstrate that they did everything reasonable and prudent to make sure a line doesn’t break and if they can’t, there are consequences that may include losing one’s job.

I would, however, feel confident in saying that over 90 percent of our line breaks are the direct result of the action or inaction of other parties. This includes errors made in the design stage, utility companies not knowing where lines are, owners not willing to use any level of Subsurface Utility Engineering (SUE) to precisely locate utilities prior to putting a job out for bid and locator errors.

I commend Mr. Fox for admitting the lack of expertise in the locating industry. I wish project owners, engineers and utility companies would do the same in accepting blame for their errors. If all parties would apply their resources to correctly marking utilities and not be so concerned with assessing blame and spending precious dollars to litigate these matters years down the road, our industry as a whole would be better off.
I would like to think that as things go forward, we will get better. But I honestly believe that as more and more new utilities are placed underground, there will be more forgotten, abandoned and out of service lines we are forced to navigate around.

I hope that as an industry that all parties recognize, as Mr. Fox and I do, that we need to make a better effort to keep our communities and workers safe.

James T. Dacey
DOLI Construction Corp.
Chalfont, Pa.